64% plan to buy another company in the next five years
New research from Marktlink, the independent international mergers and acquisitions (M&A) advisory firm, with a UK base in Manchester, reveals that 47% of SME leaders have considered buying another business in the past year. Of these, nearly two thirds (64%) are planning to purchase another company in the next five years.
UK entrepreneurs are most likely to have considered buying another company in the last 12 months, when compared to the European average of 39%.
The firm’s new Marktlink Monitor surveyed 1,066 SME entrepreneurs across the UK, Netherlands, Belgium, Denmark, and the Nordics with 224 respondents from UK-based SMEs.
Despite the challenges of the last 18 months, which saw SME owners navigate rising inflation, interest rates, the ongoing impact of Brexit and funding shortages, UK businesses remain optimistic. Recognising signs of improvement in economic conditions and increasing availability of growth opportunities, half (50%) of UK entrepreneurs think now is a good time to buy a company.
Commenting on the findings, Jonny Parkinson, managing partner at Marktlink, said: “SMEs in the UK have had to navigate a number of hurdles over recent years, but the results reflect that we are beginning to come out on the other side. Resilient businesses that have navigated through the recent challenges of an economic slowdown, inflationary pressures, and higher interest rates, are now beginning to see some light on the horizon as these factors ease.
“The second half of the year has been much stronger than the first and we’re seeing activity levels pick up, meaning that entrepreneurs are rightly feeling optimistic that conditions will improve in the not-so-distant future.
“Appetite for acquisitions is high partly because business leaders recognise the opportunities to consolidate and acquire companies that have retained good performance to grow market share. It is well reported that private equity houses remain sat on significant volumes of ‘dry powder’ and continue to show a strong interest in companies that have been able to successfully navigate the recent market turbulence.”
Against the backdrop of recent trading challenges and in pursuit of a stronger future for the business, almost a third (31%) of business leaders have considered selling their company in the last 12 months.
Overall, UK SME leaders are hopeful that 2024 will bring a greater level of opportunity, with 57% expecting that the domestic M&A market will improve in the next twelve months compared to the European average of 48%.
Jonny Parkinson continued: “We are seeing owners who are now considering a sale due to the fatigue caused by the recent trading challenges, or where they recognize the value of de-risking and taking some cash off the table should things not improve as expected. The opportunity to financially secure a personal future and a stronger future for the business through the sale to a financial or strategic partner is increasingly appealing to a lot of owners.
Where owners are historically reluctant to consider a sale to a competitor within the industry, the increasing appetite from international buyers, particularly the US and Europe, the latter of which are facing challenges accessing the UK market post-Brexit, offers an attractive proposition to UK shareholders. It allows them to realise value now and sell to someone who understands the business and the market but isn’t a direct competitor and can often offer significant growth opportunities to the acquired company.”
